Cassava Sciences Stock: Here We Go Again

Dec. 21, 2021 3:40 PM ETCassava Sciences, Inc. (SAVA)152 Comments

Summary

  • While the interim data looks fantastic, and some are pushing for early approval of the drug by the FDA, some questions remain surrounding the academic integrity of the work.
  • Another Journal has come forward with results of an investigation and review of foundational papers key to Cassava's current drug for Alzheimer's Disease.
  • Regardless of where you fall on this argument, this is a blow to the short theses that have been published.
  • All things considered, all that matters is the data and the drug will either be shown to be truly effective in the phase 3 trials, or it will not.
  • Looking for a helping hand in the market? Members of BAD BEAT Investing get exclusive ideas and guidance to navigate any climate. Learn More »

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We think Cassava Sciences (NASDAQ:SAVA) is going to remain one of the most controversial and volatile stocks as we had into 2022. We are ultimately bullish on the science, but the stock action? Well, a few months ago we described the action as similar to a casino. This is one of the names that can make or break you in a day or so long or short if you are trading. Over at BAD BEAT Investing, in our speculation and high-risk, high-reward room, we once again pegged this stock as a strong buy at $40 even, with some adding on the recent drop to $35. We once again cited fast gains that could be made, but also the potential for multiple orders of gains should the science hold up here. In other words, it makes a great swing trading stock, but for the medium/long-term, you are essentially buying a lottery ticket that could return 10X gains, or be worthless, all depending on the science.

Now, the science has been getting called into question by the ardent bears. That has impacted the crazy volatility even further, and is why it is one of those stocks that lead many to call Wall Street legalized gambling.

So what the heck is going on today after the massive fall? Well, believe it or not, most of the same arguments are still being made by the bears, while the bulls have had to patiently wait for data. The ultimate question is can their drug, simufilam, designed to treat Alzheimer's disease work?

Let us be clear. Aside from the money to be made either long or short, we all should stop a moment and actually root for the company and others working on this type of treatment. There is a lot of hope with this one for those suffering from Alzheimer's as well as their loved ones. They are suffering, with little effective treatment out there.

That said, the initial data readouts have been positive, but have been met with extreme criticism. You may recall that the interim analysis demonstrated a 1.6 point improvement in the ADAS-Cog11 system in Alzheimer's patient's cognition level rating.

So what? Well as it turns out, that is a 10% average improvement. The readout also showed that there was a near 30% improvement in behaviors such as agitation and fear. Those are good results.

Folks, as we head into the holidays let us remember that millions have suffered from the consequences of Alzheimer's Disease. The company showed there was continued improvement in most of the enrolled patients with an average of 6.8 points of improvement is reported in the ADAS-Cog11, or a 40% average improvement in Alzheimer's patient's overall cognition. However, there continue to be bears putting their faith in accusations of fraud. TA few months ago there was scientific victory, in The Journal of Neuroscience triggering a mini-short squeeze.

In that review by the Journal of Neuroscience, an investigation and critical review showed no evidence of data manipulation in one of the technical papers that was an early key to effectiveness of simufilam. Back in 2012 when the drug was first being looked at for possible effectiveness, the accusations from the group this summer claimed the data was manipulated and false. Essentially they claimed the western blots, which measure proteins and changes, was falsified.

Now, today, we are seeing another mini short-squeeze in SAVA stock for a similar reason. This time the Neuroscience journal reviewed data, and there is once again "no evidence to support claims of data manipulation in a 2005 paper" authored by the Company and its scientific collaborators. This is once again a big blow to bears who have argued the foundational science is fraud.

The Journal of Neuroscience first cleared the company and its paper, and now so has Neuroscience. The Impact Factor of this journal is 3.590, ranking it 140 out of 273 in the field. That is rather prestigious, and a serious academic journal. Remi Barbier, President & CEO stated:

"Another science journal has cleared us of allegations. This clearance is from an independent third party who is neutral and expert in the field. This reinforces my conviction that false and misleading allegations of scientific misconduct being made against us are simply designed to enrich those making them. People who seek to profit from false allegations may not comprehend the harm they are causing the Alzheimer's community, or perhaps they simply don't care. Leaving a trail of destruction in their wake in the quest for profit, with little concern for patients or their caregivers, is a twisted form of money-making and the opposite of what people with dementia deserve."

As before with the Journal of Neuroscience we have once again been hearing accusations just today on social media regarding the findings as a cover up. But this is in no way is a cover up, or conspiracy. These academic journals are well respected, peer-reviewed publications with major reputations on the line. This is a major victory for the company and its shareholders. Now, we can look ahead to the real results, though, we will point out that the company is not completely out of the woods. Keep in mind, that last week, on December 17, 2021, the Journal of Neuroscience issued a subsequent Expression of Concern while maintaining its earlier clearance, pending the outcome of a different investigation by an academic party into allegations. So there is more to be done, but this is another big win for investors here.

Take home

Here is the deal. While the interim data looks fantastic, and some are pushing for early approval of the drug by the FDA, some questions remain surrounding the academic integrity of the work. The shorts have been in control for a while, and the company has to wait for these investigations to be done to counter them. In turn, investors watch the stock suffer. But all that matters is the data. That is it. Nothing else. The data. Not interpretation. Not accusations. Not hope. Not belief. Data. There are now phase 3 trials which are getting underway, which, if the drug is truly effective, will be clear during the trial, and we will have an idea from the data, if there is hope for treating Alzheimer's Disease. That is it.

With the huge short interest in the stock, trading has had to be halted a few times this morning. There is a lot of covering happening, as well as paper hands selling in our opinion. The stock will likely normalize today and this week, so traders will take profit to be sure, but this squeeze could last a few sessions.

Regardless of where you fall on this argument, this is a blow to the short theses that have been published.

All things considered, all that matters is the data. The drug will either be shown to be truly effective in the phase 3 trials, or it will not.

We are holding the lottery tickets that it is successful, while trading around the position to make money.

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Disclosure: I/we have a beneficial long position in the shares of SAVA either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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